Central bank considers raising withholding tax to foreigners
The People's Bank of China, is reviewing a decision by taxation authorities to impose a withholding tax on foreign banks, a senior bank official said yesterday. The State Administration of Taxation imposed the new tax from July 1, but it does not apply to domestic banks. Foreign bankers have complained this leaves them at a disadvantage. 'The central bank is working with finance and tax departments and I believe that in the near future we will find a solution that will satisfy everyone,' the central bank official said. He said the tax was unlikely to affect larger foreign banks but would have a 'rather large' impact on medium and small-sized banks. Tax officials said the withholding tax of 20 per cent would help to create a level playing field since foreign banks pay 15 per cent income tax on foreign currency business while the rate for domestic banks was 33 per cent.